Neil MacFarquhar

Moscow: Russia's President Vladimir Putin spoke with Chancellor Angela Merkel of Germany on Thursday, her office in Berlin said, reportedly telling the German leader that Ukraine must remove its military from the south-eastern region of the country in order to resolve the showdown there with pro-Russian militants who have seized several official buildings.

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"Putin emphasised that it was imperative today to withdraw all military units from the south-eastern regions, stop the violence and immediately launch a broad national dialogue as part of the constitutional reform process involving all regions and political forces," the Russian news agency Interfax reported.

Russia has repeatedly blamed Ukraine for escalating the situation and has accused the government in Kiev of deploying 11,000 soldiers in the region. Acting Ukrainian president Oleksandr Turchynov said on Wednesday that the security services had lost control of the region to armed separatists who have seized government buildings in about a dozen towns. In a sign of the worsening crisis, Mr Turchynov said Ukraine will begin national conscription.

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Ukraine has said that it sent soldiers to the east in response to manoeuvres by about 40,000 Russian troops deployed just over the border on what the Kremlin has termed training exercises. Kiev has said that any move by Russian troops over the border would be treated as an invasion.

Christiane Wirtz, a spokeswoman for the German chancellor, said Dr Merkel had urged Mr Putin to intervene in the case of seven military monitors, including four German soldiers, affiliated with the Organisation for Security and Co-operation in Europe, who are being held hostage by a separatist mayor in the pro-Russian stronghold of Slaviansk.

The conversation was initiated by Dr Merkel, the Kremlin said. Both leaders reportedly agreed that the 57-nation OSCE should serve as mediator in the impasse over Ukraine.

In a separate report from Interfax, the pro-Russian movement in Slaviansk said it had freed two of three captured members of the Ukrainian security services in exchange for the release of an unspecified number of its own activists. The report could not be immediately confirmed by independent sources.

The separatists controlling city hall in Slaviansk are holding an estimated 40 prisoners, including the elected mayor. The status of the elected mayor, Neli Shtepa, has been in dispute, with the militants saying that she is under their protection but free, and the government in Kiev saying she is in custody. On Wednesday, the city council met behind closed doors to accept Ms Shtepa's resignation as mayor, but said that she would remain in the city hall building.

Ukraine police officers argue with a pro-Russian activist while the government building is taken. Photo: AP

Ms Shtepa, in a brief interview last month organised by the separatists, said the gunmen had detained her in the building, that she was sleeping on a mattress on the floor of an office, and that she was not free to leave.

Russia and the separatists have denied that they are working together. Mr Putin has also said that there are no Russian troops in eastern Ukraine, and has denied that Moscow is driving the rebellion there. He made similar claims during the annexation of Crimea, however, and then later acknowledged the existence of a Russian operation.

Russian President Vladimir Putin reportedly told Angela Merkel that Ukraine must remove its military from the south-eastern region of the country in order resolve the showdown. Photo: Reuters

The Russian Foreign Ministry issued another statement on Thursday condemning Ukraine for seeking to hold a national vote on May 25, including presidential elections and a referendum on decentralisation, while military operations continue in the east. Some analysts believe that Russia is deliberately destabilising the eastern region via the separatists in order to undermine the attempt to elect a legitimate government in Ukraine.

Details of the conversation between Mr Putin and Dr Merkel emerged shortly after Russian news agencies reported the start of what were described as training manoeuvres by a newly formed Russian attack helicopter unit near the Baltic states of Estonia and Latvia. The deployment could crank up tensions with NATO, which has stationed extra fighter jets to reassure the jittery former Soviet republics that are worried the Kremlin might be eyeing more countries than just Ukraine.